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Profit and Loss are a company that specialise in financial markets and business and technology information. They also hold forex events throughout the world and there just so happens to be one in London later this month. Personally, I thoroughly enjoy going to events such as these. Hearing expert opinions while meeting other traders from the Forex London Network is a great way to spend the day. On Wednesday 23rd April 2014 Profit and Loss have secured some fantastic speakers and a great variety of subjects for them to speak about. The sessions are as follows: – Better Execution: Do best execution rules reflect the changing market structure and modern technology available? – FX Options, The Year We Find Out: Is 2014 the year the ‘new’ options market evolves? – Vision of the Future: How do service providers react and adjust? How will the industry build an efficient structure for the next decade? – New Channels, New Challenges: What are the pros and cons of new trading medians and how does the market infrastructure need to adapt to cope? – Think Tank: Lit, Dark or Dusky? The future of the marketing model. The speakers we are most looking forward to are Joanthan Wykes and David Holcombe. Jonathan Wykes is the head of e-FX sales, EMEA and the global head of FX Algo Sales at Bank of America Merrill Lynch. He will be one of the speakers throughout the better execution session. We are keen to hear his experience of when he was a key player in advancing the execution services Algo product from equities into FX. David Holcombe is the senior MD, FX, Nadaq OMX. David will be speaking about the future and challenges of technology and how existing services will evolve. What Forex events are you looking forward to this year? Leave us a comment and let us know or get in touch via Twitter, also follow the event by using the hashtag #ForexNetworkLondon and check out @Profit_and_Loss Twitter...

It’s been a long time coming. Of the major currencies commonly traded, there have been no interest rate increases since 2010 when Australia last increased its overnight rates. Australian rates didn’t last long at those levels and were reduced in stages soon afterwards, matching the other major economies. This time though, things feel different. On Wednesday evening this week, the Reserve Bank of New Zealand announced a rise in interest rates from 2.5% to 2.75% (well, Thursday morning in New Zealand at the time). An interest rate increase in any of the major currencies is as rare as New Zealand’s national bird, the kiwi. It’s currency, nick-named the kiwi was already strong and on the announcement, it flew higher. This might not be great news for mortgage holders in New Zealand and it might not get picked up by many commentators, but to me, this is a significant turning point. New Zealand is a small economy, not even in the top 50 in terms of GDP. Yet it’s currency is traded as one of the 8 majors. During the economic crisis and fall out after 2008, interest rates have been slashed. Other major economies went further and adopted measures such as quantitative easing (QE) to stimulate their economies. The talk is still of how to reduce the dependence of measures such as QE and “normalise” economies. In this regard, the Fed has its own tapering programme running at the moment. To me, the significance of the announcement is that it marks the beginnings of what could be called “normal” again. The New Zealand economy has been growing strongly. Export demand is healthy and many economic indicators suggest strong demand in the local economy with the prospect of inflation. How refreshing to see interest rates being used once more as a weapon to protect against inflation. As for the rest of the Western economies, I suspect they’ll be looking enviously at the Kiwi success. In Europe and the USA, the spectre of deflation has not been totally eliminated. In Japan, they are still working at creating inflation. In the UK and USA, we still have greatly indebted consumers, companies and governments. We’ve had the artificial stimulus of ultra-low interest rates for several years to get our economies bumbling along. Let’s hope the kiwi in flight is the light at the end of the tunnel we all hope...

You may have heard that the British spend a lot of time talking about the weather. It’s true. But there is another nation that beats us on this score, the USA. In my view, they spend more time discussing the weather in the USA. They even have a dedicated weather channel on TV. Anyone following the US weather will be aware of their big winter freeze this year with exceptionally low temperatures. In her recent testimony to Congress, even Janet Yellen spoke of the impact of the freezing weather on economic activity in the USA. She mentioned that more data is needed as it is difficult to quantify the impact. When spring arrives, our collective mood improves and we feel more positive. The days are getting lighter, the weather is kinder and plants burst into growth. There is an impact on the economy as we head out and spend more. If people have to dig their way through snow drifts and fight off polar bears at the end of the street, they are hardly likely to be out there spending money and driving the economy forwards. Having said all that, the first green shoots of spring arrived this week. And they came from a surprising source – Europe. In his press conference on Thursday afternoon, Mario Draghi referred to the more positive data coming from Europe. Just the mention of growth caused the Euro to leap in value against the US Dollar. With spring arriving in Europe, it was only a short time to wait for the US figures (NFP) on Friday. Evidence from January and February suggested these figures were going to disappoint and the US economy was running out of steam. The dollar sold off again early on Friday giving a further opportunity to profit ahead of the figures. I was watching a trade in the market some 20 minutes ahead of the figures, I detected some buying of the US Dollar, not what I was expecting. As a trader, I am there to act on evidence though. It was this early buying that led me to close my Euro trade for a profit. At that time, I said to a fellow trader that I felt these figures are going to be better than the market expects. Nice when your gut feeling is right. Come the NFP announcement, the figures were better than expected and the previous month’s figures were revised upwards. Buy the dollar. It was an apt reminder that spring always follows winter. After the severe winter in the US, it was inevitable spring would arrive sooner or later. Following in Europe’s footsteps, the US NFP figures announced that spring arrived this...

The non-farm payroll (NFP) figures a week ago did not suggest to me that we are out of the woods just yet. After strong numbers for several months on the spin, January’s low numbers weren’t significantly revised upwards and the numbers for February came in on the low side. This suggests that while growth in the world’s largest economy is continuing, it is not doing so at the pace set last quarter. This is two months of lower than expected jobs growth. Not the end of the world by any means, as it is only two months of data. Maybe the frozen weather conditions are slowing the rate of growth? Once spring arrives, it will be full steam ahead again? I have a niggling doubt in the back of my mind though. It is not just the USA with figures that aren’t as optimistic. We saw GDP figures for Japan today, which while they are growing, are hardly setting the world alight. As for the Eurozone, it seems that growth of 0.3% is treated as really great news. When I look at the UK economic figures for the past month or so, they too have been as damp as the weather. The levels of growth talked about in the final quarter of last year seem to be on hold for now. The sharp drop in CPI does not suggest a strong demand in the UK economy. Confidence is a word frequently associated with the conditions for economic growth. Where is this confidence right now? One look at some of the emerging economies tells a story. Take Turkey for example. Its exchange rate has been hammered recently, leading to the Turkish Central Bank intervening in the markets to protect its currency. Within 48 hours, the impact of the intervention was lost and the Turkish Central Bank responded by raising interest rates quite dramatically to protect the currency. Turkey was not the only emerging market to suffer. Several others raised interest rates as money flowed out of these countries back to “safe haven” assets. For a fortnight or so, there was a real sense of “risk off” again. Growth figures from China are often cited as a trigger for changes in economic expectations and a trigger for the risk attitude. We could be on the verge of economies slowing again. That could be a bit tough for the Eurozone, as it hasn’t really got started. With Yellen, the new lady in charge at the FED, I wouldn’t want to bet on the current taper in QE continuing at the same rate if weak figures continue. This afternoon, Yellen signalled she wants to review more data prior to making any changes. She also said the recovery has been slow by historical standards. The confidence levels seem to be weaker now than a few weeks ago. Mark Carney, governor of the Bank of England gave a similar message last Wednesday. The tales of caution are all around, rather than descriptions of economies that are out of the...

The first full week of 2014 has seen trading activity resume in full. Yesterday, we had the Bank of England and European Central Bank setting interest rate policies for their economies. The UK rates were held, with UK economic news generally continuing to support sterling. With the US economic growth powering ahead, it has to be reckoned that the Eurozone will eventually arrive at the party and benefit from this growth, in turn returning to growth. However, the Euro was under pressure yesterday as growth is lacklustre to say the least. Probably more accurate to say lacking instead. That was yesterday. Of course, today was the big economic announcement, the first non-farm payroll figures for 2014. After solid figures throughout last year, leading up to the tapering decision last month, it was perhaps inevitable that sooner or later a set of figures would disappoint. We didn’t have to wait long. The 1:30 (UK time) wobble for USD came on the back of disappointing jobs figures. Whichever currency pair you chose to trade, you were pretty much ok as long as you were selling dollars. Excepting CAD, which came off worse. But let’s get some perspective on these figures. The shock value spooked the markets today. But the revision to last months figures was upwards. I suspect we will see an upwards revision next month. I remain of the view that the US economy has some momentum behind it and one months job figures are not enough to stop that momentum. The freezing conditions could cause a further blip in February’s figures though. My predictions remain dollar strength for 2014 and sterling strength too, with sterling outperforming the dollar in the first quarter. I remain pessimistic on the Euro, Yen and Aussie for now and my views will colour my trading decisions for the first months of...

The biggest talking point among traders for several months now has been “When will the FED start tapering?”. At least we know the answer now. Wednesday’s FED meeting announced a reduction in the amount of money being thrown at the market, reduced by $10bn a month from $85bn to $75bn. This really is a symbolic gesture. In the overall scheme of things, a reduction of $10bn a month being pumped into the US economy is neither here or there. The economic output of the US economy is well over $15,000bn and growing strongly. The other aspect of the FED announcement was not to expect any changes to interest rates anytime soon. This is a factor in most western economies at the moment – a strong growth in demand and GDP is not filtering through to prices. Interest rates are the weapon to slow demand and prices. Until the growth in the economy starts to take up the slack capacity in the economy, we can expect interest rates to remain low. Once the threat of inflation looms, that is when we can expect real interest rates to rise. For now, the FED has set the path into 2014. This has at least given the markets some direction. This should lead to a gradual strengthening of the USD against other currencies. Now compare the US economy with Europe and the Eurozone specifically. Which one would you want to invest in? A stagnant economy trying desperately to come up with something to stimulate growth, or an economy that has already achieved that as an outcome. With that statement, it won’t take too much to work out where I figure the Euro is heading over the next few...